The House passage of the tax reform bill is an important milestone, but there is still a lot of work to be done. The Senate is currently considering its version of the bill, and then the two chambers will come together and settle the differences through a conference committee.
Our goal is to reduce the tax burden for all Americans. For individuals and families, the House bill simplifies the rate structure, doubles the standard deduction, and allows nine out of 10 filers to submit their tax returns on a postcard. It also lowers rates on small businesses, including a nine percent rate for businesses earning less than $75,000. Considering more than 96 percent of Nebraska’s employers are small businesses, this provision can provide a strong boost to our state’s economy.
With so many meaningful reforms included in the House’s tax code overhaul, I am particularly pleased about the numerous victories for agriculture.
One of my top priorities as we drafted the bill in the Ways and Means Committee was ensuring producers could continue to deduct property taxes on agricultural land. I fought hard to keep this deduction intact, and I am happy to report it is included in the House bill.
Farmers and ranchers have made great strides in increasing production on a per-acre basis, but land remains a primary input as they work to feed the world. Allowing the property tax on land in production to be deducted as a business cost is vital to their continued success.
Repealing the death tax and keeping stepped-up basis in place are also wins for producers and small business owners in the House bill. While I would prefer to repeal the death tax right away, doubling the exemption until the tax is fully repealed in six years provides immediate relief. Producers should not have to spend their valuable time thinking about which hoops they will have to jump through to continue their operations in future generations.
The bill also raises the cap on Section 179 expensing to $5 million and allows for full and immediate expensing for five years to help producers make more upfront investments. While these provisions are temporary in the House version, I plan to work toward making them permanent.
The first draft of the bill would have applied self-employment taxes to rental income, including agricultural land. Rental income is rightfully considered passive income, and I was able to help get this provision removed from the final bill to avoid serious repercussions for producers.
I am also aware of concerns from co-ops about repealing the Section 199 deduction for agriculture, as the full provision is repealed in the House bill. Senator Pat Roberts has proposed an amendment to the Senate bill to address this issue by applying a new small business deduction to co-ops, and I look forward to the two chambers working together to address this issue.
U.S. producers are the most efficient in the world, and they need a tax code which works for them, not against them. The House bill contains many pro-agriculture provisions, and as tax reform moves forward, I will continue working toward even greater certainty for farmers and ranchers.